Finance: CORPORATE FINANCE
ARIS DOESN'T FIT SARA LEE LIKE A GLOVE ANYMORE
When former Aris Isotoner Inc. Vice-President Richard Rubin testified at the O.J. Simpson trial in June that the bloody glove found at the murder scene could well have shrunk by as much as 15%, it didn't occur to him that the extra-large Aris Lite could be a reasonable metaphor for the company he left five years earlier.
Back in 1990, when O.J.'s wife, Nicole, whom he is charged with slaying, bought him a pair of Aris gloves at Bloomingdale's, the Sara Lee Corp. unit was rapidly growing and highly profitable, the envy of the U.S. accessories industry.
Although Aris is still the nation's largest glovemaker, with a dress glove market share estimated at more than 60%, it has, according to people familiar with the company, fallen victim lately to a series of snafus that have damaged its ties with retailers and eroded sales and profitability. After sending in two new CEOs in as many years with orders to boost profits, Sara Lee, which bought Aris in 1969 in one of its first nonfood acquisitions, has dramatically scaled back Aris' operations. On Sept. 4, the giant Chicago-based consumer-goods concern began notifying about 7,000 full-time workers at Aris' huge glovemaking plant in Manila that it would shut the facility and eliminate their jobs to shift production to countries where labor is even cheaper.
THE SETUP. The company doesn't publicly report financial results for Aris Isotoner or other subsidiaries. Nor do analysts follow Aris closely, because its contribution to Sara Lee's $17.7 billion in annual sales is relatively minuscule. But former Aris executives say the 86-year-old company posted an operating loss on an estimated $185 million in sales in the fiscal year ended June 30--a far cry from the estimated $35 million in operating income on $230 million in sales they say it delivered to Sara Lee in fiscal 1993.
To be sure, Aris Isotoner's revenues were hurt by an unusually mild winter, the ongoing consolidation of traditional department stores, and lower prices demanded by discount retailers.
But by most accounts, Sara Lee set Aris up for trouble in 1993, when Lew Frankfort, the newly appointed head of Sara Lee's accessories division, forced the retirements of Chairman and COO Lari Stanton, a popular and well-
regarded executive, and other senior officers. Frankfort replaced Stanton, now 67, with David W. Bryan, 49 [no relation to Sara Lee CEO John H. Bryan], who had earned his stripes in Sara Lee's bakery unit marketing such brands as Sara Lee cheesecake and bagels. Frankfort, says an embittered Stanton, now senior vice-president at second-ranked glovemaker Fownes Brothers & Co., "decimated the whole management team." In a bid to double sales, to $500 million, in five years, Sara Lee replaced veteran executives with people who lacked their experience in the glove industries. Says Stanton, the grandson of Aris founder Adolph Steinberger: "Bryan tried to run a glove company like a bakery."
NEW SYSTEMS. Indeed, Bryan and his associates quickly discovered that leather goods and cheesecake are different worlds. For one thing, they found that tampering with a well-oiled sales, production, and distribution apparatus can be disastrous in a quirky business in which lead times for ordering skins exceed 15 months and most sales occur between Thanksgiving and Christmas. Says Rolf Schroder, who recently retired as president of Aris (Philippines) Inc.: "They came in completely unfamiliar with the company and tried to install new systems...and change everything." Worse, complains Harry H. Albritton, former vice-president for sales, Bryan "tended to avoid talking to customers."
Bryan, who left Aris in September, 1994, and is now president of cymbals maker Avedis Zildjian Co., declined to comment on his performance at Aris or his reasons for leaving. Frankfort is now CEO of Sara Lee's Champion, Intimates, and Accessories operations but is no longer responsible for Aris. He couldn't be reached for comment.
Jack W. Salisbury Jr., a former senior vice-president with Sara Lee's Playtex Apparel Inc. unit who succeeded Bryan as president and CEO of Aris in September, 1994, called last year's single-digit sales drop "disappointing" and blamed it on the weather and late deliveries or nondeliveries. Aris, he says, is now pinning its hopes for a rebound on a colder winter, new glove styles, and an expanded casual-footwear line. Meanwhile, he says, Aris doesn't plan to capitalize on its notoriety. But it certainly can't hurt.By Phillip L. Zweig in New York